Cornwall Rivers Project

Independent Economic Evaluation

Tom Le Quesne

August 2005

Summary

This report assess the economic impacts of the Cornwall Rivers Project. Run by the Westcountry Rivers Trust, the Cornwall Rivers Project provided advice and grants to farmers and landowners in support of environmentally sensitive farming practice and enterprise diversification. In addition, riparian projects sought to directly improve environmental quality and access to fisheries, leading to increased economic benefits to the region.

1.  The quantifiable annual economic benefits to the regional economy as a consequence of the implementation of the Cornwall Rivers Project (CRP) total £1,077,000 with a net present value of £9,224,000. In addition to these quantified economic benefits, the CRP will generate very significant additional economic benefits, principally through an improvement in water quality.

2.  The total cost of the project was £1,940,000, including £309,000 in contributions from farm businesses. These costs compare exceptionally favourably with the benefits of the project. The margin of the benefits to the costs points unambiguously to the merits of the CRP approach.

3.  The increased tourism and the improved quality and quantity of available angling resulting from the scheme will result in the generation of over 5 full time job equivalents and 18 part time job equivalents in the region. In addition, the implementation of the recommendations will have generated over 50 agricultural part time job equivalents for the 3 year duration of the CRP.

4.  The cost of delivery of each of over 600 integrated farm business and land management plans was only £1338 per plan. This compares very favourably with comparable initiatives, in particular those in the public sector, especially when the external environmental benefits of the integrated approach are considered.

5.  Many of the most significant benefits from the project resulted from improved farm practice, leading to both improved farm profits and reduced environmental impact. This suggests that existing farm practice in Cornwall was not optimal.

6.  Significant contributory elements to the success of the CRP include the integration of business advice with environmental advice; and the local organisational base for the delivery of the scheme.

The success of the Cornwall Rivers Project merits close inspection in the context of the current discussions over government provision of farm business and catchment sensitive farming advice.

Contents

1. Background – The Cornwall Rivers Project 4

2. Purpose of the Economic Evaluation 5

3. Methodology 6

4. Costs of the Project 8

5. Summary of the Principle Economic Benefits 10

6. Economic Benefits (1): Estimated Direct Farm Benefits 11

7. Economic Benefits (2): Angling 2000 Scheme and Improved Angling Quality 15

8. Economic Benefits (3): Reduced Diffuse Pollution Costs 18

9. Economic Benefits (4): Increased Employment 21

10. Conclusions 22

Appendix A: Calculation of Cost of Component Parts of the Project

Appendix B: Basis for Calculation of On-farm Benefits

Appendix C: Basis for Calculation of Benefits of Increased Angling Availability and Increased sea-trout and Salmon Numbers

Appendix D: Economic Performance Indicators

Preface

This report was commissioned and surveys carried out in 2004 as the original end date for the Cornwall Rivers Project was December 2004; however, the Project was extended for a further year to December 2005. All costings and targets are therefore for the original 3 year project and budget but should hold true for the full 4 year project. In the extension year, additional farm visits were undertaken and management plans written, bringing the total number of farms under revised management to 870.

1. Background – The Cornwall Rivers Project

The Cornwall Rivers Project was designed to respond to two, related, problems. Firstly, in common with the rest of the UK, the riverine environment in Cornwall continues to be threatened and often adversely impacted by a variety of activities that combine to reduce and degrade natural ecosystems. Damage to the mainly rural catchment areas in Cornwall has resulted largely from changing land use patterns over the past thirty years or so. Secondly, these changing land-use practices in Cornwall are failing to support a thriving agricultural sector. Pressures on UK agriculture, changing economic conditions, and changing subsidy regimes require adaptation and diversification by Cornwall’s agricultural and rural economy.

The Cornwall Rivers Project (CRP) sought to address these problems in a linked and integrated catchment scale approach that simultaneously promoted environmental improvement and economic benefits. The CRP was based on the successful methods developed through the Westcountry Rivers Trust's Tamar 2000 SUPPORT and Taw/Torridge Westcountry Rivers Projects. The provision of advice and grants to farmers and landowners sought to support environmentally sensitive farming practices and enterprise diversification that generate increased income and improved environmental quality. Parallel to this, riparian projects sought to directly improve environmental quality and access to fisheries, leading to increased economic benefits to the region.

The CRP runs from 1st January 2002 to 31st December 2004 and is supported with 40% European Union Objective 1 funding, 40% match funding from DEFRA, with the remaining 20% from local private sources, principally private contributions from beneficiaries towards the capital grants made through the CRP.

Although the CRP was not fully completed at the time of data collection for this report ( October 2004), it is on course to deliver its principle outputs, including over 650 integrated farm business and land use management plans, restoration works on over 100km of river corridor, the development and maintenance of Angling 2000 (a visiting angler access scheme), and the delivery of associated community projects (McClymont, 2004).

2. Purpose of the Economic Evaluation

One of the principal objectives of the Cornwall Rivers Project is the delivery of economic benefits, and a number of targeted economic benefits were indicated as key performance indicators for the project.[1] An independent economic evaluation of the impacts of the project was therefore required as part of the initial project contract. This independent evaluation is designed to evaluate both whether the CRP has delivered the targeted economic benefits and to provide an evaluation of the wider economic benefits of the project.

In addition, it is the intention of this evaluation to serve a wider purpose in guiding future policy interventions. The development of rural support schemes to provide both environmental and business advice to farm businesses are the subject of considerable scrutiny at the current time (NAO, 2004; DEFRA, 2004). Proposals are being considered both to extend current farm advice schemes and to develop catchment based farming advisory programmes. The current evaluation can provide important evidence on the successes of the innovative approach to these issues adopted by the Cornwall Rivers Project.

3. Methodology

Economic evaluations have been conducted of the two similar previous integrated catchment scale projects delivered by the Westcountry Rivers Trust (WRT) – the Tamar 2000 Project, and the Taw/Torridge Project (Tusa, 2000; Manning, 2001). These evaluations found very similar results, both with respect to specific variables and the overall benefits of the two projects more generally. The Tamar 2000 project was estimated to have delivered annual benefits of £5,000 per farm with an overall undiscounted project cost-benefit ratio of 8.2. The Taw/Torridge project was estimated as having generated £2,700 per farm in annual benefits with a cost-benefit ratio of 8.6.

While the current evaluation draws on the existing methodology, there are a number of reasons for the development of that methodology in the current evaluation. Specifically, a targeted and in-depth evaluation of a number of the key on-farm benefits is achieved through the conduct of three separate surveys to estimate soil loss, reduced fertiliser use, and improvements in tourist income. This provides considerably more robust estimates for these benefits than the use of a single sample to cover all of the estimated benefits as in previous evaluations. Given the similarities in approach between the CRP and the two previous projects, this economic evaluation follows a benefit-transfer approach in estimating the remaining on-farm economic benefits. The consistency of approach and findings between the benefits of the two previous projects and the CRP justifies such an approach.

In addition to the on-farm benefits, an evaluation is made of a number of additional economic impacts of the project, including an estimate of the costs and benefits of the Angling 2000 scheme, and an estimate of some of the benefits from the reduction of diffuse pollution as a result of the project. It is envisaged that these will prove of use in guiding future policy approaches. Given that the principle focus of the economic benefits of the project was on the rural Cornish economy, estimates are presented for increased net on-farm income, increased income to the Cornish economy, and increased employment.

Recent UK Government approaches to evaluation and cost-benefit analysis caution against the dangers of spurious accuracy (HM Treasury, 2003). Nowhere is this more of a hazard than with the evaluation of projects of the current type, with the many complex benefits. In the light of this, this evaluation does not offer an estimate of a definitive cost-benefit ratio. Instead, it attempts to indicate the level of benefits from the project that can be quantified, with the total economic benefits of the project indicated as being in excess of this figure.

A number of estimates for the economic values associated with the performance indicators for the project were given in the project contract. In some cases the evaluation is based on these existing figures. However, where these figures are felt to be unrealistic or where improved figures exist, these are used. In particular, the detailed data collection associated with the Angling 2000 scheme allows for a new estimate of the benefits of increased salmon catches.

While the delivery of the farm business and environmental aspects of the CRP were integrated, an attempt is made to break down the costs into the component elements of the delivery of farm business plans, grants for riparian improvement, the establishment and administration of Angling 2000, and the delivery of community projects. While recognising the limitations in this division, it nonetheless provides the possibility for comparison of the costs and benefits of each of the constituent elements of the CRP.

The current value of future savings is calculated over a 10 year horizon in line with previous WRT evaluation methodology. A discount rate of 3.5% is used in line with the latest government advice (HM Treasury, 2003).

4. Cost of the project

The total cost of delivery of the component elements of the Cornwall Rivers Project is £1,940,000. The breakdown of these costs among the different elements of the project is given in table 4.1:[2]

Table 4.1: Costs of the Component Elements of the Cornwall Rivers Project

Preparation of 612 integrated land management and farm business plans, including the preparation of comprehensive farm practice information sheets / £819,000
Farm business contributions towards the implementation of farm business plans / £309,000
The contribution of £176,000 and administration of 239 grants to farmers for riparian improvement works / £609,000
Establishment and maintenance of Angling 2000 scheme / £67,000
Delivery of Community projects including demonstration sites, education etc. / £136,000
Total / £1,940,000

Table 4.1 reveals that the average cost of the delivery of each of the 612 – as of October 2004 – individually tailored integrated land management and farm business plans was £1338. This represents considerable value in the delivery of a high-quality service. The preparation of a typical plan in the CRP involves half a day of advisor time on an initial farm visit, two days of time devoted to writing the integrated land management and farm business plan, and further time spent in delivering the conclusions of the plan to the farm business.

The customer satisfaction survey conducted for the project WRT indicated 97% of customers and 100% of other stakeholders rated the team’s overall quality of service positively, and the benefits calculated below indicate the success of the farm plans in delivering beneficial change to the rural economy, with an estimated annual on-farm income increase in excess of £1,369 per farm.

This average cost of the delivery of each of the farm plans in the CRP compares favourably with the costs of delivery of comparable government services. The government sponsored Farm Business Advisory Scheme (FBAS) delivered advice to 15,000 farmers on the basis of expenditure of £27,000,000 (Martin Popplewell, National Audit Office, personal comment). While this works out at a broadly comparable figure of £1,800 per farm business advised, the time and detail devoted to each farm business within the FBAS is considerably lower than the time devoted to each farm business within the CRP. In addition, the benefits generated by the CRP farm business plans are not confined to the farm alone, but include highly significant external environmental impacts.

It is likely that the cost-efficiency of the CRP reflects the greater cost-efficiency that can be delivered by smaller, independent organisations with low bureaucratic and overhead costs and strong information on local circumstances. This is a significant finding in the context of the current consideration of the possible extension of environmental and business advice schemes to the agricultural and rural sector.

5. Summary of the Principle Economic Benefits

The evaluation of the economic benefits of the CRP divides the benefits into three principle categories: direct, on-farm benefits; the benefits from improved quality and access to angling; and indirect, off-farm benefits. As the majority of the benefits of the project must remain unquantified, this evaluation does not offer a cost-benefit ratio. The evaluation assesses the quantifiable economic benefits of the project as having a net present value of £9,224,000. The costs of the project and on-farm contribution to riparian improvement costs by comparison total £1,940,000 by comparison. Table 5 summaries the evaluation of these benefits:

Table 5.1: Summary of Quantifiable Economic Impacts of the Cornwall Rivers Project

Agricultural benefits, on-farm
- Reduced soil loss, annual saving / £145,260
- Improved fertiliser use, annual benefit / £337,095
- On-farm tourist income, annual benefit / £68,010
- Additional annual on-farm benefits / £287,640
Total annual on-farm benefits / £838,005
On-farm benefits, net present value / £7,176,142
Cost to CRP of delivery of farm plans and farm improvement grants / £819,070
Cost to farm businesses of implementing recommendations / £309,000
Total Cost of On-farm benefits / £1,128,070
Angling 2000 benefits, local economy
Net annual benefit from Angling 2000 / £13,636
Net present value of Angling 2000 benefits / £116,770
Cost to CRP of establishment of Angling 2000 / £33,318
Benefits of increased numbers of salmon and sea-trout, local economy
Annual benefit of increased salmon and sea-trout catches / £223,824
Net present value of increase in salmon and sea-trout catches / £1,916,686
Cost to CRP of generating increased salmon and sea-trout populations / £608,848
Benefits of reduced diffuse pollution
Annual reduction in dredging costs, Fowey Harbour / £1,665
Net present value of annual reduction in dredging costs, Fowey Harbour / £14,258

In addition to these quantifiable economic benefits, significant economic benefits of the project have not been quantified. These include reduced external costs from soil loss, and reduced N and P pollution. An indication of the costs of diffuse N and P pollution from agriculture are discussed below, although not indicated in table 5.1.6. Direct Economic benefits (1): Estimated direct farm benefits

One of the principal goals of the CRP was the delivery of increased net farm incomes through improved – and environmentally less harmful – farm practice, and through farm enterprise diversification, principally tourism expansion. A wide range of recommendations have been taken up by farmers on the basis of advice contained in the integrated farm business plans delivered by the CRP, and only the principal elements of these can be evaluated.